Low wages in Portugal worsen housing crisis for the middle class

Georgina Simoes, a nursing home caregiver in Lisbon, Portugal, is among an increasing number of people who can no longer afford housing due to their insufficient income. About a quarter of Portugal’s working population, including Simoes, earns less than 800 euros ($845) per month. Despite this, she managed to survive for ten years by paying only 300 euros per month for her modest one-bedroom apartment in an unremarkable area of Lisbon. Due to the exorbitant increase in rental prices in the city, the landlord of her residence is expelling her. She claims that she will not leave because locating another residence in close proximity to her workplace would be too costly.

Simoes is not alone in this predicament, as several members of the middle class in Portugal are finding themselves unable to afford housing due to surging home prices, escalating rents, and increasing mortgage rates. The influx of foreign investors and tourists seeking short-term rentals is one of the factors contributing to the problem.

Recently, there have been mounting concerns about the health of financial institutions and the prospect of high inflation, which have added even more uncertainty to the situation. To address this issue, Portugal’s centre-left Socialist government introduced a package of measures, which is expected to be approved by the Cabinet this week. According to the European Union’s statistics agency, house prices in Portugal surged by 157% between 2020 and 2021, while rents increased by 112%.

However, the increasing expenses of property only provide a partial account. Portugal, which is among the most impoverished nations in Western Europe, has traditionally attracted investment by relying on a low-wage economy. In fact, as per the Ministry of Labour’s data, a little over 50% of Portuguese employees earned less than 1,000 euros ($1,054) per month in the previous year.

The housing problem in the 27-nation EU has worsened due to a recent increase in inflation, particularly in food and energy prices, as well as the ongoing economic and labour effects of the COVID-19 pandemic. According to the bloc, more than 82 million households in the EU are struggling to pay their rent, with 17% of people living in overcrowded accommodations and just over 10% spending more than 40% of their income on rent. The most affected groups include young people, families with children, the elderly, those with disabilities, and migrants.

In Portugal, this issue is further compounded by the growth of tourism, which had been booming before the pandemic, and the influx of foreign investors who have been driving up real estate prices and displacing residents from their neighbourhoods. Portugal attracted a record 25 million foreign tourists in 2019, but due to the pandemic, that number has dropped to 15.3 million since.

Short-term vacation rentals, largely for foreign tourists, have taken over homes in several neighbourhood. It is a common sight to see and hear visitors dragging suitcases over the cobblestones. According to Santos, the local traditions have vanished, and there are no longer any bakeries or grocery stores in the area. To stop this trend from continuing, activists, uding Santos, are pushing for a referendum to ban short-term vacation rentals in Lisbon. They have been gathering every weekend in various neighbourhoods to collect signatures in support of their goal. They need a minimum of 5,000 signatures to initiate the referendum process at city hall. The movement is growing, and the activists are determined to preserve Lisbon’s charm and character.

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Low wages in Portugal worsen housing crisis for the middle class

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